President Bush’s Outsourcing Initiatives
Impassioned presidential campaign speeches of George W. Bush promised government reform and pointed to more outsourcing, privatization and partnering on the federal level during his reign. The campaign hoopla is now over, and Bush is smack dab in the middle of a juggling act – fulfilling his new responsibilities and trying not to drop any balls as he attempts to move forward with his game plan.
Will Bush’s campaign promises become more than notions? A February 14, 2001 memo from the Office of Management and Budget (OMB) chief told agency leaders to expand outsourcing and advance eGovernment. It advised: “The President envisions a government that has a citizen-based focus, is results-oriented and, where practicable, market-driven.”
There’s an expression for authority and truth that comes from the sport of horse racing: straight from the horse’s mouth. Permanent teeth don’t appear until a horse is two and a half years old; the third pair of teeth appears between ages four and five. So, no matter what an owner says about the age of a horse, the truth is in the evidence – the horse’s teeth.
What is the real evidence of America’s 43rd President’s plans for outsourcing?
Early Warning Signs
“In Texas we have a tradition of straight talk and fair dealing,” said George W. Bush at the dedication of Bob Bullock Texas History Museum in Austin, April 27. Indeed, all his public remarks on his view of government leave no room for misunderstanding. He also favors using technology to accomplish increased performance. At a dinner for the Electronic Industries Alliance last month, he said, “the role of our government is to create an environment in which the entrepreneur can flourish, in which minds can expand, in which technologies can reach new frontiers.”
At a meeting at the White House in March with high-tech leaders, he stated, “…we need to have a results-oriented system all around the country. Here’s the way I’m doing it. I’m saying if you receive federal money, you’ve got to measure.”
In a speech regarding his program for community and faith-based efforts he advocated, “Federal policy should become outcome-based, insisting on success …. “
He made similar remarks in several states during March as he sought support for his education policy and budget. At Billings, Montana, he told the audience, “I used to be governor of a great state. …I remember how I really didn’t like all the federal rules and strings, the federal government centralized authority telling the people how to run the school system. …But in our budget and in our plans for education reform, …we ask that in return for getting help that you …develop an accountability system that says to the good taxpayers, our children are learning; an accountability system that will tell us whether or not progress is being made. See, I think it’s important for us to be a results-oriented nation, a nation that measures progress.”
Outstanding goals. And it would seem they point to the heart of outsourcing. But the horse’s mouth indicates something different from the speeches. President Bush has already compromised.
In May, the U.S. Senate voted to authorize more than $100 billion in additional education spending over the next decade. But that vote also revised the education bill’s performance requirements for schools. The new standard only requires schools to show that groups of minority and poor students are improving by one percent a year. At that rate, it will take decades to see noticeable improvement. The lower standard was a compromise sought by the White House because of resistance from states that felt the proposed standards were too tough. The lower standard can barely be called “results oriented.”
The Bush administration has stated that it plans to require specific linkages between program funding and agency performance goals in its fiscal 2003 budget (there was not enough time to do this in preparation of the 2002 budget). Again, it speaks to the heart of outsourcing’s value, for penalties for unsatisfactory performance levels are a primary management tool in the most successful outsourcing relationships.
However, at the Senate confirmation hearing for Sean O’Keefe – Bush’s nominee for deputy director of OMB – O’Keefe stated that the 1993 Government Performance and Results Act (GPRA) requirements “are most effective when they are used as a management tool by agencies to uncover management shortcomings and aid internal planning. Using GPRA primarily as a means to reward or punish agencies for their management performance yields mixed results.”
We have heard the President say “results oriented” and “performance based” over and over. But look at the horse’s mouth.
George W. Bush is no novice to the concept of leveraging other people’s expertise and money to accomplish goals. That’s exactly what he did when he sought investors for his Texas oil companies years ago. And he saw the outstanding results of what happened when his father, while President, turned a government computer project over to the private sector in 1969 in order to ensure the utmost in development resources and expertise. The private sector turned that project into the Internet.
Although his gubernatorial strategy to outsource the Texas computer system that runs Texas welfare systems was killed by state employee groups that successfully lobbied the pro-union Clinton administration, Bush succeeded on other outsourcing initiatives during his years as Governor of Texas. Texas outsourcing was well above the average for all states – 29 percent of the state’s total IT budget in Fiscal Year 2000, compared with a nationwide average of about 18 percent (according to a Texas Department of Information Resources report).
During the presidential campaign, people believed his Texas record boded a high rate of outsourcing to come in the Federal government, especially with mandates for eGovernment services. Admittedly, it’s still early in the Bush administration; however, considering the amount of transaction time necessary to complete the bidding and contractual negotiations of outsourcing agreements, progress must begin now.
Government news headlines have focused on a series of memoranda issued through OMB; each clearly states President Bush’s endorsement of more competition and outsourcing. However, Steven Else, executive director of the non-profit Center for Public-Private Enterprise, says the effective models and tools that can lead to more coherency and consistency in approaching outsourcing opportunities really are not in place yet. As an example, a recent GAO report found that the Pentagon needs to improve the way it reports the costs of service contracts because the current method cripples the Pentagon’s ability to measure the benefits of outsourcing.
“Efforts are being made to better codify possible targets in the Federal government, but no headway at all has been made regarding how to package already identified candidates for competition and/or outsourcing,” says Else. Historically this has been a serious problem, and he observes that “currently there seems to be no movement to improve the execution of outsourcing initiatives, other than to insist on more training of those government employees who assist in the studies.” In his opinion, “until an emphasis on migrating purely commercial activities into the private marketplace is established, the Bush Administration will be locked into the same broken public-private competition model that has crippled intelligent outsourcing for the past six years.”
Perhaps the most interesting development from the horse’s mouth is the role of Stephen Goldsmith, who served as Bush’s chief domestic policy advisor in 1999. Bush became interested in Goldsmith because of his involvement with charter schools and partnerships between government and faith-based organizations. Subsequently, Goldsmith became a key player in guiding Bush to clarify his policy positions during his presidential campaign.
Goldsmith is renowned for his accomplishments in outsourcing and privatization while serving as Mayor of Indianapolis, Indiana for eight years. The Indianapolis wastewater treatment contract exceeded the required $50 million in savings during the first three years. He mandated public-private competitions for services in several city departments, and the $400 million in savings was used to rebuild the city. The city’s airport needed a new terminal and reduced costs for passengers, and they found an outsourcer that agreed to performance-based pay. His Indianapolis outsourcing initiatives have been studied nationwide as examples of successful outsourcing. Goldsmith also has won national awards for his accomplishments in eGovernment services.
There was a great deal of speculation on where Goldsmith would land in the new Bush administration in Washington, D.C., and many predicted he would be appointed to a leadership position at OMB or another government agency or, perhaps, a key player in eGovernment initiatives. Instead, he was recently named as one of 12 people to serve on the Commercial Activities Panel, which is charged with studying federal outsourcing policy. It’s not a positive sign that such a leader in results-based, competitive outsourcing initiatives (who was also a respected advisor during the campaign) did not receive a top-level Bush appointment.
The other members of the panel are another telltale sign of what’s really happening regarding changes to federal outsourcing policies. The Comptroller General of the U.S chairs it. In addition to Goldsmith, the panel includes a RAND economist; President of Johnson Controls World Services; President of American Federation of Government Employees; President of National Treasury Employees Union; Deputy Director of OMB; Director, Institute of Politics, Harvard University; President, Professional Services Council; Director of the Institute for the Study of Public Policy Implementation, American University; Director, Office of Personnel Management; and the Undersecretary of Defense for Acquisition, Logistics, and Technology. One might question why there are not more panel members from the private sector – or why two members represent government workers’ unions.
The Commercial Activities Panel (which was enacted by law before Bush became President) will make recommendations to Congress. Presumably, the usual snail’s pace of Congress when it is influenced by lobbying groups will make much of the panel’s recommendations ineffectual.
Although it seems at times as though he’s blowing hot and cold when it comes to outsourcing, President Bush has a history of orchestrating situations to achieve results. He has uncanny timing, prioritizes effectively and handles projects methodically, step by step. He is genuinely humble and thus, appears to be non-threatening. But he is also shrewd.
There is a labyrinth of thorny problems in government performance, and outsourcing is an excellent solution for many of them. The Federal government as a whole failed its fourth consecutive audit for fiscal 2000 largely because of poor financial management at DoD and Agriculture. Officials from the agencies and from GAO said a commitment from agency leaders to make financial management a priority is crucial to improvement.
Until recently, the Bush administration has shown only rhetoric but not real indications of guidance. But a new senior management team for DoD told a Senate confirmation hearing in mid May that the team would operate similarly to executive committees of private-sector corporations in coordinating decisions and strategy. Among other members, the team includes the secretaries of the Army, Navy, and Air Force. All three come from companies accustomed to using outsourcing. They are Bush nominees – a strong indication of some background orchestration going on.
One positive sign is Bush’s appointments of private-sector leaders to top Cabinet and agency positions. We thus can expect a more businesslike decision-making process to begin the process of reinventing government.
An excerpt from Section I of Bush’s Fiscal Year 2002 Budget reads: “For too long, politics in Washington has been divided between those who wanted big Government without regard to cost and those who wanted small Government without regard to need. Too often the result has been too few needs met at too high a cost. This budget offers a new approach….”
Let’s hope that our President’s approach will not be to compromise and will, instead, be bold enforcement of a wide range of innovative, best practices; clearly accountable leaders; and results-based performance strategies through outsourcing – as he promised.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].